RENAULT CONSOLIDATED FINANCIAL STATEMENTS 2004

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2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated income statements Sales of goods and services 38,772 35,658 34,586 Sales financing revenues (note 4) 1,943 1,867 1,750 Revenues (note 3) 40,715 37,525 36,336 Cost of goods and services sold (31,162) (29,273) (28,178) Cost of sales financing (note 4) (1,171) (1,155) (1,169) Research and development expenses (1,383) (1,243) (1,143) Selling, general and administrative expenses (4,581) (4,452) (4,363) Operating margin (note 1-J) 2,418 1,402 1,483 Other operating income and expenses (note 7) (270) (168) (266) Operating income 2,148 1,234 1,217 Net interest income (expense) (note 8) (22) (129) (179) Repurchase of redeemable shares (note 8) (343) - - Other financial income and expenses, net (note 8) Financial expense (348) (71) (91) Share in net income (loss) of companies accounted for by the equity 2,452 1,860 1,331 method Nissan 12 months (1) (note 12) 1,767 1,705 1,335 Nissan additional quarter (1) (note 12) Other companies accounted for by the equity method (note 13) (4) Group pre-tax income 4,252 3,023 2,457 Current and deferred taxes (note 9) (634) (510) (447) Group net income 3,618 2,513 2,010 Minority interests (67) (33) (54) Renault net income 3,551 2,480 1,956 Number of shares outstanding (in thousands) (note 10) 265, , ,560 Earnings per share in (2) (note 10) ,53 Earnings per share excluding Nissan additional quarter, in (1) As Nissan now establishes quarterly financial statements, the three-month difference between Nissan and Renault financial years has been absorbed in the 2004 consolidation. The additional quarter covers the period October 1 December 31, (2) In accordance with French accounting regulations, treasury shares held for the purposes of stock option plans awarded to Group managers and executives are considered to be in circulation. The diluted earnings per share is therefore identical to the basic earnings per share. Key figures before capitalization of development expenses (note 11-A): Operating margin 1, Renault net income 2,926 1,982 1,359 Page 1 / 40

3 Consolidated balance sheets at December 31 ASSETS Intangible assets (note 11) 1,969 1, Property, plant and equipment (note 11) 10,595 10,392 10,262 Investments in companies accounted for by the equity method: 9,992 8,933 7,966 Nissan (note 12) 8,259 7,219 6,348 Other companies (note 13) 1,733 1,714 1,618 Other investments and financial assets (note 14) Deferred tax assets (note 9) 451 1,328 1,378 Inventories (note 16) 5,142 4,872 4,780 Sales financing receivables (note 15) 20,633 19,614 17,872 Automobile receivables (note 17) 1,878 2,096 2,067 Other receivables and prepaid expenses (note 18) 2,067 2,136 2,043 Loans and marketable securities (note 19) 2,269 2,854 2,183 Cash and cash equivalents (note 19) 5,521 4,276 3,354 Total assets 60,942 58,291 53,228 SHAREHOLDERS' EQUITY AND LIABILITIES Share capital 1,086 1,086 1,086 Share premium 3,453 3,453 3,453 Retained earnings 9,761 7,638 6,026 Translation adjustments (1,791) (1,066) (693) Net income 3,551 2,480 1,956 Shareholders' equity (note 20) 16,060 13,591 11,828 Minority interests Deferred tax liabilities (note 9) Provision for post-employment benefits (note 21) Other provisions for risks and liabilities (note 22) 2,247 2,255 2,317 Interest-bearing borrowings (note 23) 27,590 27,182 24,485 Automobile division 7,220 7,069 6,749 Sales financing division 20,370 20,113 17,736 Trade payables 7,234 7,197 6,933 Other liabilities and deferred income (note 24) 6,391 5,925 5,786 Total shareholders' equity and liabilities 60,942 58,291 53,228 Page 2 / 40

4 Changes in consolidated shareholders' equity Number of shares (thousands) Share capital Share premium Translation Reserves and adjustment retained earnings Balance at December 31, 2001 before allocation 242, , ,658 10,051 Capital increase (1) 42, , ,196 Dividends (234) (234) Change in translation adjustment (693) - (693) 2002 net income ,956 1,956 Other changes (2) (448) (448) Balance at December 31, 2002 before allocation 284,937 1,086 3,453 (643) 7,932 11,828 Dividends (294) (294) Change in translation adjustment (423) - (423) 2003 net income ,480 2,480 Balance at December 31, 2003 before allocation 284,937 1,086 3,453 (1,066) 10,118 13,591 Dividends (357) (357) Change in translation adjustment (725) - (725) 2004 net income ,551 3,551 Balance at December 31, 2004 before allocation 284,937 1,086 3,453 (1,791) 13,312 16,060 (1) After neutralization related to Renault's 44.4% investment in Nissan (notes 2.3-A and 12). (2) Impact related to Renault's increased investment in Nissan following the Nissan capital increase reserved for Renault (notes 2.3-A and 12). Details of changes in consolidated shareholders' equity in 2004 are given in note 20. Total Page 3 / 40

5 Consolidated statements of cash flows Renault net income 3,551 2,480 1,956 Depreciation and amortization (note 11-C) 2,266 2,223 2,066 Net allocations to long-term provisions Net effects of sales financing credit losses (Gains)/losses on asset disposals (117) (228) (212) Share in net income of companies accounted for by the equity method (net of dividends received) (1) (1,899) (1,516) (1,072) Repurchase of redeemable shares (2) Deferred taxes Minority interests Other Cash flow 4,808 3,560 3,578 Financing for final customers (12,270) (11,921) (11,208) Customer repayments 11,103 10,257 10,114 Net change in renewable dealer financing (35) (339) (282) Increase in sales financing receivables (1,202) (2,003) (1,376) Bond issuance (note 23-A) 1,100 1,550 1,266 Bond redemption (note 23-A) (1,050) (1,123) (1,095) Net change in other interest-bearing borrowings 667 1,516 1,592 Net (increase) decrease in loans and marketable securities 227 (33) (61) Net change in interest-bearing borrowings for the sales financing division 944 1,910 1,702 Decrease (increase) in inventories (116) (189) (300) Decrease (increase) in trade receivables for the automobile division 161 (114) 263 Decrease (increase) in other receivables and prepaid expenses 59 (157) (290) Increase (decrease) in trade and other payables (71) Increase in other liabilities and deferred income Decrease (increase) in working capital CASH FLOWS FROM OPERATING ACTIVITIES 4,957 3,543 4,071 Nissan capital increase reserved for Renault - - (1,875) Other acquisitions, net of cash acquired (127) (73) (98) Purchase of property, plant and equipment and intangibles (3,483) (3,234) (3,390) Disposal of investments, net of cash transferred Proceeds from disposal of property, plant and equipment and intangibles Net (increase) decrease in other financial assets 24 (29) 154 CASH FLOWS FROM INVESTING ACTIVITIES (3,107) (2,709) (4,724) Bond issuance (automobile division) (note 23-A) 407 1,427 1,008 Bond redemption (automobile division) (note 23-A) (290) (229) (228) Net increase (decrease) in other interest-bearing borrowings of the automobile division (2) (982) 9 (764) Net (increase) decrease in loans and marketable securities 404 (756) 41 Renault SA capital increase reserved for Nissan - - 2,158 Other proceeds from shareholders Dividends paid to parent company shareholders (383) (316) (250) Dividends paid to minority interests (35) (21) (35) CASH FLOWS FROM FINANCING ACTIVITIES (861) 115 1,991 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ,338 Cash and cash equivalents: opening balance 4,276 3,354 2,135 Increase ,338 Effect of changes in scope of consolidation and exchange rate 256 (27) (119) Cash and cash equivalents: closing balance 5,521 4,276 3,354 (1) Dividends received from companies accounted for by the equity method totalled 553 million in 2004 ( 344 million in 2003 and 260 million in 2002). (2) The repurchase of redeemable shares that took place in 2004 resulted in a net (545) million change in the automobile division's interest-bearing borrowings. The total repurchase value of the shares comprised: million corresponding to the shares' par value (including accrued interest), - a price supplement of 343 million, included in the year s expenses. This operation increased the Group's net indebtedness by the amount of the price supplement, i.e. 343 million (note 8). Page 4 / 40

6 Information by division A. INCOME STATEMENT ITEMS BY DIVISION Automobile Sales financing 2004 Interdivision transactions (1) Consolidated total External sales (note 4) 38,645 2,070-40,715 Interdivision sales (1) (798) - Revenues 39,194 2,319 (798) 40,715 Operating margin 1, ,418 Operating income 1, ,148 Financial expense on repurchase of redeemable shares (343) - - (343) Financial income (expense) other than repurchase of redeemable shares 93 3 (101) (5) Share in net income of companies accounted for by the equity method (2) 2, ,452 Current and deferred taxes (460) (171) (3) (634) Group net income 3, (95) 3, External sales (note 4) 35,535 1,990-37,525 Interdivision sales (1) (597) - Revenues 35,955 2,167 (597) 37,525 Operating margin 1, ,402 Operating income ,234 Financial income (expense) 42 3 (116) (71) Share in net income of companies accounted for by the equity method 1, ,860 Current and deferred taxes (392) (118) - (510) Group net income 2, (116) 2, External sales (note 4) 34,456 1,880-36,336 Interdivision sales (1) (544) - Revenues 34,800 2,080 (544) 36,336 Operating margin 1, ,483 Operating income ,217 Financial income (expense) 26 4 (121) (91) Share in net income of companies accounted for by the equity method 1, ,331 Current and deferred taxes (343) (104) - (447) Group net income 1, (118) 2,010 (1) Interdivision transactions are carried out under near-market conditions. (2) The share in net income of companies accounted for by the equity method for 2004 includes Nissan's net income for a 15-month period (note 12). Page 5 / 40

7 6 B. BALANCE SHEET ITEMS BY DIVISION Automobile Sales financing Interdivision transactions (1) Consolidated total December 31, 2004 Property, plant and equipment and intangibles 11, (187) 12,564 Investments accounted for by the equity method 9, ,992 Other investments and financial assets 2, (1,729) 425 Deferred tax assets Inventories 5, ,142 Customer receivables 1,988 20,966 (443) 22,511 Other receivables and prepaid expenses 1, (115) 2,067 Loans and marketable securities 2, (1,019) 2,269 Cash and cash equivalents 4,451 1,074 (4) 5,521 Total assets 40,222 24,155 (3,435) 60,942 Shareholders' equity 16,096 1,713 (1,749) 16,060 Minority interests Deferred tax liabilities and provisions for risks and liabilities 3, ,283 Interest-bearing borrowings 7,754 21,354 (1,518) 27,590 Trade payables 7,307 - (73) 7,234 Other liabilities and deferred income 5, (140) 6,391 Total shareholders' equity and liabilities 40,222 24,155 (3,435) 60,942 Net financial indebtedness (2) (note 25) 541 December 31, 2003 Property, plant and equipment and intangibles 11, (178) 11,786 Investments accounted for by the equity method 8, ,933 Other investments and financial assets 1, (1,572) 396 Deferred tax assets 1, ,328 Inventories 4, ,872 Customer receivables 2,222 20,006 (518) 21,710 Other receivables and prepaid expenses 1, (76) 2,136 Loans and marketable securities 2, (587) 2,854 Cash and cash equivalents 3,215 1,065 (4) 4,276 Total assets 37,776 23,392 (2,877) 58,291 Shareholders' equity 13,643 1,555 (1,607) 13,591 Minority interests Deferred tax liabilities and provisions for risks and liabilities 3, ,001 Interest-bearing borrowings 7,634 20,548 (1,000) 27,182 Trade payables 7,253 - (56) 7,197 Other liabilities and deferred income 5, (248) 5,925 Total shareholders' equity and liabilities 37,776 23,392 (2,877) 58,291 Net financial indebtedness (2) (note 25) 1,748 December 31, 2002 Property, plant and equipment and intangibles 10, ,167 Investments accounted for by the equity method 7, ,966 Other investments and financial assets 1,819 9 (1,410) 418 Deferred tax assets 1, ,378 Inventories 4, ,780 Customer receivables 2,214 18,270 (545) 19,939 Other receivables and prepaid expenses 1, ,043 Loans and marketable securities 2, (923) 2,183 Cash and cash equivalents 2,463 1,072 (181) 3,354 Total assets 34,961 21,294 (3,027) 53,228 Shareholders' equity 11,828 1,410 (1,410) 11,828 Minority interests 374 3, Deferred tax liabilities and provisions for risks and liabilities 3, ,819 Interest-bearing borrowings 7,248 18,776 (1,539) 24,485 Trade payables 6, ,933 Other liabilities and deferred income 5, (78) 5,786 Total shareholders' equity and liabilities 34,961 21,294 (3,027) 53,228 Net financial indebtedness (2) (note 25) 2,495 (1) Interdivision transactions are carried out under near-market conditions. (2) The Group considers its sales financing business as an operating activity. Net financial indebtedness figures thus relate exclusively to the automobile division (note 1-B). Page 6 / 40

8 7 C. CASH FLOW STATEMENT ITEMS BY DIVISION Automobile Sales financing Interdivision transactions (1) Consolidated total 2004 Cash flow 4, (152) 4,808 Increase in sales financing receivables - (1,190) (12) (1,202) Net change in interest-bearing borrowings for the sales financing division Change in working capital (31) 407 Cash flows from operating activities 4, (143) 4,957 Purchase of property, plant and equipment, net of disposals (2,035) (270) 82 (2,223) Purchase of intangibles, net of disposals (788) (3) - (791) Equity investments, net of disposals (109) (8) - (117) Net change in other financial assets Cash flows from investing activities (2,908) (281) 82 (3,107) Shareholder financing (400) (100) 100 (400) Net change in interest-bearing borrowings of the automobile division, loans and marketable securities (464) - 3 (461) Cash flows from financing activities (864) (100) 103 (861) Increase (decrease) in cash and cash equivalents 980 (33) Elimination of the impact of the net change in interest-bearing borrowings of the automobile division, loans and marketable securities 121 Impact of exchange rate fluctuations and other changes on net financial indebtedness 106 Change in net financial indebtedness (2) 1, Cash flow 3, (169) 3,560 Increase in sales financing receivables - (2,043) 40 (2,003) Net change in interest-bearing borrowings for the sales financing division - 1,935 (25) 1,910 Change in working capital 239 (128) (35) 76 Cash flows from operating activities 3, (189) 3,543 Purchase of property, plant and equipment, net of disposals (1,927) (253) 88 (2,092) Purchase of intangibles, net of disposals (606) (2) - (608) Equity investments, net of disposals 25 (5) - 20 Net change in other financial assets (29) - - (29) Cash flows from investing activities (2,537) (260) 88 (2,709) Shareholder financing (336) (101) 101 (336) Net change in interest-bearing borrowings of the automobile division, loans and marketable securities Cash flows from financing activities (59) (101) Increase (decrease) in cash and cash equivalents 793 (18) Elimination of the impact of the net change in interest-bearing borrowings of the automobile division, loans and marketable securities (277) Impact of exchange rate fluctuations and other changes on net financial indebtedness 231 Change in net financial indebtedness (2) Cash flow 3, (121) 3,578 Increase in sales financing receivables - (1,404) 28 (1,376) Net change in interest-bearing borrowings for the sales financing division - 1,702-1,702 Change in working capital 322 (155) Cash flows from operating activities 3, (93) 4,071 Purchase of property, plant and equipment, net of disposals (2,284) (147) - (2,431) Purchase of intangibles, net of disposals (684) - - (684) Equity investments, net of disposals (1,763) - - (1,763) Net change in other financial assets (125) 154 Cash flows from investing activities (4,587) (12) (125) (4,724) Shareholder financing 1, (46) 2,065 Net change in interest-bearing borrowings of the automobile division, loans - and marketable securities - (74) (74) Cash flows from financing activities 1, (46) 1,991 Increase (decrease) in cash and cash equivalents (264) 1,338 Elimination of the impact of the net change in interest-bearing borrowings of the automobile division, loans and marketable securities - Impact of exchange rate fluctuations and other changes on net financial indebtedness 586 Change in net financial indebtedness (2) 1,432 (1) Interdivision transactions are carried out under near-market conditions. (2) The Group considers its sales financing business as an operating activity. Net financial indebtedness figures thus relate exclusively to the automobile division (note 1-B). Page 7 / 40

9 8 D. OTHER INFORMATION BY DIVISION Automobile Sales financing 2004 Interdivision transactions (1) Consolidated total Capital expenditure 2, (249) 3,483 Depreciation and amortization 2, (62) 2,266 Non cash expenses other than depreciation Research and development expenses 1, ,383 Personnel expenses 5, ,426 Workforce at December ,384 3, , Capital expenditure 2, (220) 3,234 Depreciation and amortization 2, (52) 2,223 Non cash expenses other than depreciation Research and development expenses 1, ,243 Personnel expenses 4, ,115 Workforce at December ,531 3, , Capital expenditure 3, ,390 Depreciation and amortization 1, ,066 Non cash expenses other than depreciation Research and development expenses 1, ,143 Personnel expenses 4, ,965 Workforce at December ,934 3, ,351 (1) Interdivision transactions are carried out under near-market conditions. E. INFORMATION BY GEOGRAPHIC AREA France Other European countries Other countries Consolidated total 2004 Consolidated revenues 14,135 21,336 5,244 40,715 Capital expenditure 2, ,483 Property, plant and equipment and intangibles 8,870 2,442 1,252 12,564 Other operating assets (1) 5,314 2, , Consolidated revenues 13,311 19,627 4,587 37,525 Capital expenditure 2, ,234 Property, plant and equipment and intangibles 8,092 2,643 1,051 11,786 Other operating assets (1) 5,716 2, , Consolidated revenues 13,917 18,266 4,153 36,336 Capital expenditure 2, ,390 Property, plant and equipment and intangibles 7,834 2,323 1,010 11,167 Other operating assets (1) 5,954 2, ,890 (1) Other operating assets include inventories, trade receivables for the automobile division and other receivables and prepaid expenses. Consolidated revenues are presented by location of customers. Property, plant and equipment and intangibles and capital expenditure are presented by location of subsidiaries. Page 8 / 40

10 Notes to the consolidated financial statements 1 - ACCOUNTING POLICIES CHANGES IN THE SCOPE OF CONSOLIDATION REVENUES APPLYING 2004 GROUP STRUCTURE AND METHODS SALES FINANCING REVENUES AND COST PERSONNEL EXPENSES REMUNERATION OF DIRECTORS AND EXECUTIVES OTHER OPERATING INCOME AND EXPENSES FINANCIAL EXPENSE CURRENT AND DEFERRED TAXES EARNINGS PER SHARE INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT INVESTMENT IN NISSAN ACCOUNTED FOR BY THE EQUITY METHOD OTHER INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD OTHER INVESTMENTS AND FINANCIAL ASSETS SALES FINANCING RECEIVABLES INVENTORIES AUTOMOBILE RECEIVABLES OTHER RECEIVABLES AND PREPAID EXPENSES LOANS AND MARKETABLE SECURITIES AND CASH SHAREHOLDERS' EQUITY PROVISION FOR POST-EMPLOYMENT AND OTHER LONG TERM BENEFITS OTHER PROVISIONS FOR RISKS AND LIABILITIES INTEREST-BEARING BORROWINGS OTHER LIABILITIES AND DEFERRED INCOME NET FINANCIAL INDEBTEDNESS FINANCIAL INSTRUMENTS OFF-BALANCE SHEET COMMITMENTS AND CONTINGENCIES COMPANIES CONSOLIDATED AT DECEMBER ACCOUNTING POLICIES The Renault Group financial statements are prepared in accordance with current French accounting regulations. In application of the regulation passed in July 2002 by the European Parliament and the European Council of Ministers, Renault's consolidated financial statements for 2005 will be prepared under IFRS (International Financial Reporting Standards). Reported figures for 2004 will be restated accordingly for 2004/2005 comparability. A. CONSOLIDATION The consolidated financial statements include the financial statements of all companies controlled exclusively, directly or indirectly, by the Group. Companies in which the Group exercises material influence are included in the financial statements on an equity basis, while joint ventures are consolidated on a proportionate basis. Companies which fulfil these criteria but are not consolidated are recorded as Investments in subsidiaries and affiliates (note 14). None of these companies' individual contributions to consolidated figures exceeds the following: revenues 20 million inventories 20 million Their consolidation would have a negligible impact on the consolidated financial statements, since they are Groupfinanced entities which: acquire almost all their purchases from Group companies (this mostly concerns dealership-type establishments), or carry out almost all their sales transactions with Group companies (the principal company concerned being Renault Sport). These companies' shares are stated at the lower of purchase cost or value in use, which for controlled companies is determined by reference to the share in net assets (note 1-M). By this method, any decline in the value of a non-consolidated company is automatically taken into account in the Group's consolidated net income and shareholders' equity. Goodwill arising on acquisition of subsidiaries or companies accounted for by the equity method represents the difference, at acquisition date, between the purchase cost of shares (including expenses) and the proportion of assets and liabilities acquired, estimated at fair value. It is amortized on a straight-line basis over a duration specific to each company, but no longer than 20 years. For companies accounted for by the equity method, this goodwill is included in the value of the investment as stated in the balance sheet. The corresponding amortization is included in the income statement under Page 9/ 40

11 10 "Share in net income (loss) of companies accounted for by the equity method". All material intercompany transactions and unrealized internal profits are eliminated. B. INFORMATION BY DIVISION AND GEOGRAPHIC AREA AND DEFINITION OF NET FINANCIAL INDEBTEDNESS Information is disclosed for the following divisions: The automobile division, comprising the production, sales, distribution and automobile service subsidiaries for passenger and light commercial vehicles and the subsidiaries in charge of cash management for these companies, The sales financing division, which the Group considers as an activity with independent operations, comprising RCI Banque and its subsidiaries. Each of these two divisions forms a coherent unit exposed to its own specific risks. Apart from dividend income and taxes, income and expenses relating to sales financing are recorded as operating items. The tax effect inherent to the French consolidated taxation system and the worldwide consolidated tax reporting system (which applied until December 31, 2003) is included in the taxes due by the automobile division. Assets, minority interests and liabilities are specific to each division. Receivables permanently assigned by the automobile division to the sales financing companies are treated as operating assets by the assignee. In coherence with this presentation by division, interestbearing borrowings are split into two captions in the balance sheet: Interest-bearing borrowings for the automobile division, Interest-bearing borrowings for the sales financing division, considered by the Group as an operating item. Consequently, the Group's net financial indebtedness includes the following items for the automobile division: Interest-bearing borrowings, Investment loans, Marketable securities, Cash and cash equivalents. C. TRANSLATION OF THE FINANCIAL STATEMENTS OF FOREIGN SUBSIDIARIES a) In general, the financial statements of financially and economically autonomous foreign subsidiaries are translated as follows: Balance sheet items other than components of shareholders equity, which are stated at historical value, are translated at the year-end rate of exchange. Income statement items are translated at the average exchange rate for the year. The translation adjustment is included in consolidated shareholders equity and has no impact on net income. b) The financial statements of foreign subsidiaries with autonomous activities operating in high-inflation economies (i.e. where total inflation over three years exceeds 100%) are translated as follows: Balance sheet items are translated into Euros at the year-end rate after adjusting non-monetary items for local inflation. After adjustment of monetary items for inflation, income statement items are translated using the same year-end rate as for the balance sheet. The translation adjustment is included in consolidated shareholders equity and has no impact on net income. c) For foreign companies whose activities are an extension of the parent company s business, the historical-rate method is applied for non-monetary balance sheet items and the translation adjustment is included in net income D. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS At year-end, monetary balances in foreign currencies that have not been hedged are translated at the year-end rate. The resulting foreign exchange differences, together with the exchange gains and losses on transactions in foreign currencies for the year, are recognized in the income statement. Hedged foreign currency operations are translated using the hedged rate. E. REVENUES Revenues include all income from the ordinary activities of consolidated companies. They include proceeds from the sales of goods and services by the automobile division, as well as income from sales financing. Page 10/ 40

12 SALES OF GOODS AND SERVICES Sales and margin recognition Sales of goods are recognized when vehicles are made available to the distribution network in the case of non- Group dealers, or upon delivery to the end-user in the case of direct sales. The margin on sales is recognized immediately for normal sales by the automobile division, including for contracts that can be considered as finance leases (long-term or with a purchase option). However, no sale is recognized on a finance lease from a Group finance subsidiary if the Group has made a buy-back commitment or if the lease is for a period of less than 36 months. Sales of new passenger or commercial vehicles, when the sale contract contains a buy-back clause covering a period of less than 36 months, are recorded as operating leases: the difference between the price paid by the customer and the buy-back price is treated as rental income, and spread over the duration of the buy-back clause. The production cost on the new vehicle involved in the original transaction is recorded in inventories for operating leases of less than one year, or as a fixed asset when the operating lease exceeds one year. Second-hand vehicle sales give rise to recognition of sales revenue and the related margin. A provision is established when an overall loss on the contract becomes probable in view of the vehicle's resale value. Warranty The estimated or incurred costs relating to product or part warranties not covered by insurance are charged to expenses when the sales are recorded. Renault also offers its customers extended warranty and maintenance contracts, the income and margin on which are recognized over the period covered by the contract. Sales incentive programs The cost of these programs is deducted from revenues when the corresponding sales are recorded. If programs are approved after the sale, a provision is established when the decision is made. The Group sometimes organizes promotional campaigns offering reduced-interest loans to end-users. This expense is recognized immediately when the rates offered cannot cover refinancing and administration costs. SALES FINANCING INCOME AND MARGIN RECOGNITION The Group's sales financing companies mainly finance the sale of passenger vehicles to dealers and end-users. Financing takes the form of standard loans or leasing arrangements, which may be long-term leases or include a purchase option. Unless the Group has a buy-back commitment on leased vehicles, these financing arrangements are treated as loans and posted to the balance sheet at the nominal value of outstanding capital less any provisions. Income on sales financing is calculated so as to give a constant interest rate over the term of the contract. Income and costs related to the sales financing activity are recorded as follows: 11 Income from sales financing is included in revenues. The cost of financing sales is considered as an operating expense and included in the operating margin. It mainly comprises interest incurred by sales financing companies, other costs and revenues directly related to administration of this type of refinancing (temporary investments, hedging and management of exchange and interest rate risks), the cost of risks other than those relating to refinancing of receivables, and depreciation and gains or losses on sales of leased assets. Commissions payable Commissions are recognized when financing is granted to customers. Doubtful receivables Allowances are established to cover risks of non-recovery of receivables as soon as repayment of a receivable appears to be doubtful. These provisions are established on a case-by-case basis or using a statistical approach. F. RESEARCH AND DEVELOPMENT EXPENSES As of January 1, 2002, development expenses incurred between the approval of the decision to begin development and implement production facilities for a new vehicle or part (e.g. engine or gearbox) and the subsequent approval of the design for mass production are capitalized as intangible assets (previously they were recorded as costs in the year incurred). They are amortized from the date of approval for production, over the expected market life of the vehicle or part, up to a maximum period of seven years. Revised amortization periods apply for development expenses since January 1, 2004: some have been reduced and some extended. The extensions concern expenses for development of parts and commercial vehicles, whose maximum amortization period has been raised from 5 to 7 years. This has no significant impact on the consolidated financial statements. Expenses incurred before the formal approval of product development and research expenses are recorded as costs in the year they are incurred. Expenses incurred after the start of mass production are treated as production costs. Page 11/ 40

13 G. POST-EMPLOYMENT AND OTHER LONG TERM BENEFITS OBLIGATIONS The Group s payments for defined-contribution benefit schemes are recorded as expenses for the relevant year. For defined-benefit schemes, the Group uses the Projected Unit Credit Method to determine the present value of its obligations. Under this method, benefits are attributed to periods of service according to the plan's benefit formula. However, if an employee's service in later years will earn a materially higher level of benefit than in earlier years, benefits are attributed to periods of service on a straightline basis. Post-employment benefit obligations are measured on a basis that reflects future salary increases, retirement age and mortality, and are discounted at an interest rate determined by reference to market yields at the balance sheet date on high quality corporate bonds. From January 1, 1999, the date at which IAS 19 came into force, if the net cumulative unrecognized actuarial gains and losses at the end of the previous period exceeds the greater of 10% of the present value of the defined benefit obligations at that date and 10% of the fair value of plan assets at that date, the portion of actuarial gains or losses to be recognized for each defined benefit plan is the excess so determined, divided by the expected average remaining working lives of the employees participating in that plan. H. TERMINATION BENEFITS Gains or losses on disposal of property, plant and equipment or intangible assets (except vehicle sales), Amortization of goodwill resulting from acquisition of consolidated companies, Material non-recurring items, i.e. income and charges that are exceptional in their frequency, nature or amount. The operating income does not include net financial income, the share in net income of companies accounted for by the equity method, or extraordinary items if any. Extraordinary items are strictly defined and correspond to income or charges of significant amounts, resulting from events over which the Group has no control. K. INCOME TAX The Group recognizes deferred taxes, on a non-discounted basis, for all temporary differences between the tax and net book values of assets and liabilities in the consolidated balance sheet. Using the liability method, deferred taxes are calculated using the latest tax rate enacted at year-end applicable to the period when temporary differences are reversed. For deferred tax assets related to tax credits or loss carryforwards and other temporary differences, valuation allowances are established as appropriate in view of the probability of future recovery. In cases where the Group has decided not to distribute the retained earnings of consolidated subsidiaries in the foreseeable future, no provision for taxes on dividends is established. 12 The cost of adjusting the workforce is recorded as soon as the Group s commitment has been announced to the employees concerned. I. RESTRUCTURING MEASURES The estimated cost of restructuring is recognized as soon as a detailed plan is provided and the restructuring is either announced or in progress. J. OPERATING INCOME AND OPERATING MARGIN Operating income includes all revenues and costs directly related to the Group s activities, whether recurrent or resulting from non-recurring decisions or operations, such as restructuring costs. Unusual items, defined as income or expenses of an unusual frequency, nature or amount, are included in results of operating activities. The operating margin corresponds to the operating income before Other Operating Income and Expenses, which cover: L. PROPERTY, PLANT AND EQUIPMENT GROSS VALUE The gross value of property, plant and equipment corresponds to historical acquisition or production cost. Production cost includes design expenses. Maintenance and repair costs, except those incurred to increase productivity or prolong the life of an asset, are recorded as expenses. Assets used by the Group under finance leases are treated as assets financed by credit. Vehicles leased to customers are vehicles under lease from a Group financial company, for which the Group has a repurchase obligation, or vehicles sold under an agreement including a buy-back clause, when the buyback commitment expires within 36 months of the original contract date (note 1-E). Restructuring costs and costs relating to workforce adjustment, Gains or losses on disposal of operating subsidiaries, Page 12/ 40

14 DEPRECIATION Depreciation is calculated on a straight-line basis over the following estimated useful lives: In use prior to 1987 In use since 1987 Buildings 15 to 40 years 15 to 30 years Specific tools 2 to 7 years Machinery and other tools (other than press lines) 5 to 16 years 5 to 15 years Press lines 20 to 30 years Other tangible assets 4 to 6 years The useful lives applied for property, plant and equipment were reviewed at January 1, More detailed asset categories were defined in order to identify particular assets requiring specific useful lives. As a result, some useful lives were extended or reduced, with no significant impact for the Group's consolidated financial statements. Accelerated depreciation is recorded when an asset's useful life becomes shorter than the initially expected period of use, particularly when it is decided to withdraw a vehicle or part from the market. The recoverable value of assets is assessed at the level of each division. For the automobile division, the return on assets is measured taking all European countries together, since the industrial plant and the product range throughout Europe form one coherent unit. The return on industrial assets outside Europe is measured for each coherent subunit. When recoverable value is lower than net book value, depreciation equivalent to the difference is recorded as a provision. M. SECURITIES by long-term financing to ensure they can be held until maturity. Discounts and premiums are spread over the remaining life of the security on a straight-line basis. Provisions for amortization are established when the issuer is likely to default. MARKETABLE SECURITIES Marketable securities are valued at acquisition cost excluding related expenses and accrued interest for bonds, or at market value if this is lower. Treasury shares held for the purposes of stock option plans awarded to Group managers and executives are included in marketable securities. These shares are recorded at the lower of purchase price or stock market price. 13 A provision for risk and liabilities is established when the option exercise price falls below the net book value. N. INVENTORIES Inventories are stated at the lower of cost or net realizable value. Cost corresponds to acquisition cost or production cost, which includes direct and indirect production expenses and a share of manufacturing overheads based on a normal level of activity. Cost is generally calculated by the FIFO (First In First Out) method. O. CASH AND CASH EQUIVALENTS This item consists of cash and marketable securities maturing within three months of the acquisition date. P. ASSIGNMENT OF RECEIVABLES INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES AND AFFILIATES Investments in non-consolidated subsidiaries and affiliates are carried in the balance sheet at acquisition cost less any provisions. The corresponding dividends are recorded in the year of distribution. Provisions are established when the value in use of the investments falls below acquisition cost. This value is determined on the basis of profitability prospects, the commercial outlets the investment represents for the Group, and the share in net assets. However, for companies controlled by Renault but not included in the consolidation due to their non-significant nature (note 1- A), the value in use is determined by reference to the share in net assets alone. DEBT SECURITIES Debt securities consist entirely of fixed-rate securities acquired to be held on a long-term basis, usually until maturity. They are hedged by interest rate futures for durable protection against foreign exchange exposure, or Receivables assigned to third parties (through securitization or discounting) are removed from Group assets when the associated risks and benefits are also transferred to the third parties in question. The same treatment applies to assignments between the automobile and sales financing divisions. Q. BORROWINGS LOANS EXPENSES AND ISSUANCE COSTS Loan expenses, including issuance costs, and bond redemption premiums are amortized over the corresponding duration. RENEGOTIATION OF LOANS Costs involved in renegotiation of loans and similar operations intended to bring interest rates closer to market rates are recorded as financial expenses in the year the negotiation was conducted. Page 13/ 40

15 14 R. FINANCIAL INSTRUMENTS To manage its exchange rate exposure, the Group uses forward foreign currency contracts, currency swaps and, to a lesser extent, options. Forward foreign currency contracts are recognized as hedges insofar they are designated as such. These hedges may cover the net investment of the Group in certain foreign entities, foreign currency receivables or debts, or firm foreign currency commitments. The contracts are treated as off-balancesheet commitments, with related gains and losses recorded upon completion of the underlying transactions. Gains and losses on instruments that hedge net investments in foreign entities are recognized, after income tax effect, as an adjustment directly in shareholders equity. The Group s general policy with respect to interest rate risk is to manage interest rate exposure on a comprehensive basis using interest rate swaps, forward interest rate contracts and currency swaps. Interest rate swaps are treated as off-balance-sheet commitments and the resulting interest differentials are recorded as an adjustment to interest expense. The unrealized capital gains or losses on forward interest rate contracts designated as hedges are used to adjust the interest expense for the duration of the underlying debt. For other contracts, only unrealized losses are recognized in the income statement. The Group also uses commodity futures to hedge its purchases. Where it is possible for the Group either to settle certain transactions by a payment or to take physical delivery of the commodities concerned, these contracts are not treated as financial instruments. 2 - CHANGES IN THE SCOPE OF CONSOLIDATION CHANGES IN THE SCOPE OF CONSOLIDATION IN 2004 No significant change in the scope of consolidation took place during CHANGES IN THE SCOPE OF CONSOLIDATION IN 2003 The main changes in 2003 were as follows: A. SOFASA (COLOMBIA) As a result of the increase in Renault's holding (from 23.7% to 60%), Sofasa, previously accounted for by the equity method, has been fully consolidated since March 28, B. AGRICULTURE On April 30, 2003, Renault sold a 51% stake in Renault Agriculture to Claas. The remaining 49% investment was deconsolidated as of the date of the agreement, since Renault no longer exercises significant influence over the company. Renault and Claas have options respectively to sell and purchase an additional 29% of the capital of Renault Agriculture, to be exercised within a one-year period beginning April 30, 2005, and further options respectively to sell and purchase the remaining 20%, which can be exercised from January 1, C. AVTOFRAMOS (RUSSIA) Avtoframos has been fully consolidated since January 1, The Group increased its 50% stake to 76% as of November 1, CHANGES IN THE SCOPE OF CONSOLIDATION IN 2002 A. REINFORCEMENT OF THE -NISSAN ALLIANCE NISSAN CAPITAL INCREASE RESERVED FOR In accordance with the terms of the 1999 and 2001 agreements between Renault and Nissan, on March 1, 2002 Renault exercised stock purchase warrants at the agreed price of 400 yen per share for a total cost of 1,875 million, thus raising its equity investment in Nissan from 36.8% to 44.4%. As a result, additional goodwill of 64 million was recognized, and (417) million was included in the Group's reserves (note 12). CAPITAL INCREASE RESERVED FOR NISSAN Continuing the relationship begun with the agreements signed in 1999 and 2001, Nissan acquired 15% of the capital of Renault SA for a total of 2,166 million ( 2,158 million after charging expenses to the issue premium) through two subscriptions on March 29 and May 28, 2002 respectively. This capital increase led to a (962) million elimination in Renault's consolidated shareholders' equity, equivalent to 44.4% of the amount received ( 2,166 million), corresponding to Renault's share in Nissan's capital. B. SALE OF 'S INVESTMENT IN IRISBUS On January 2, 2002, Renault's stake in Irisbus was transferred to Iveco for a total of 166 million, generating a gain of 34 million (note 7). Page 14/ 40

16 C. SALE OF S INVESTMENT IN GLOBAL AUTOMOTIVE LOGISTICS On July 17, 2002, Renault sold its holding in Global Automotive Logistics. The resulting gain amounted to 79 million (note 7) REVENUES APPLYING 2004 GROUP STRUCTURE AND METHODS Renault workforce in France by category 15 Apprentices 1,170 1, Production workers 33,006 33,513 33,726 Office and clerical staff, supervisors and technicians 29,483 29,985 31,122 Engineers and managerial staff 12,524 11,701 11,676 Total at December 31 76,183 76,272 77,521 Automobile Sales Total financing 2003 published revenues 35,535 1,990 37,525 Deconsolidation of Renault Agriculture, at (176) - (176) April 30, 2003 (note 2.2- B) Other changes in scope of consolidation and presentation (1) 2003 revenues applying 2004 Group structure 35,566 1,998 37,564 and methods 2004 revenues 38,645 2,070 40,715 (1) As of January 1, 2004, sales of company vehicles are included in revenues. 4 - SALES FINANCING REVENUES AND COST Income on end-user and dealer 1,047 1,086 1,052 financing Income on leasing, rental and similar operations Total sales financing revenues (1) 1,943 1,867 1,750 Net credit losses (106) (136) (143) Other sales financing costs (1,065) (1,019) (1,026) Total cost of sales financing (1,171) (1,155) (1,169) (1) The breakdown of total revenues for the sales financing division shown in the information by division is as follows: Sales financing revenues 1,943 1,867 1,750 Sales of goods and services External sales by the sales financing division 2,070 1,990 1, PERSONNEL EXPENSES 6 - REMUNERATION OF DIRECTORS AND EXECUTIVES Total compensation to the Chairman and Chief Executive Officer for 2004 amounted to 2,192,899 ( 1,981,812 in 2003 and 1,817,715 in 2002). He also benefits from the complementary pension plan of the members of the Group Executive Committee. Directors fees totalled 540,119 in 2004 ( 520,342 in 2003 and 317,549 in 2002). This included 28,000 for the Chairman in 2004 ( 28,000 in 2003 and 16,500 in 2002). 7 - OTHER OPERATING INCOME AND EXPENSES Restructuring and workforce adjustment costs and provisions (175) (160) (156) Gains and losses on disposal of operating subsidiaries (38) Gains and losses on disposal of property, plant and equipment and (48) intangible assets (except vehicle sales) Amortization of goodwill resulting from acquisition of consolidated (22) (22) (17) companies Material non-recurring items (80) (116) (159) Total (270) (168) (266) A. RESTRUCTURING AND WORKFORCE ADJUSTMENT COSTS AND PROVISIONS These costs and provisions arise principally from the implementation of restructuring measures in certain businesses, and adjustment of workforce levels. Personnel expenses () 5,426 5,115 4,965 Average workforce 130, , ,096 Workforce at December 31, 130, , ,351 comprising: fully consolidated companies 128, , ,866 proportionately consolidated companies (portion controlled) 2,348 2,462 2,485 Renault personnel in France represented 58% of total Group workforce at December 31, Page 15/ 40

17 This item mainly includes: In 2002, the following items were concerned: 16 Cost of adjustment to present value and adaptation of the terms of the CASA early retirement plan introduced in France in 1999, and the (116) (65) (36) retirement system for long-serving workers under the French Fillon law of 2003 Other restructuring and workforce adjustment costs and provisions (1) (59) (75) (120) Depreciation on property, plant and equipment in connection with the restructuring of the foundry business of the subsidiary Française de - (20) - Mécanique Total (175) (160) (156) (1) In 2002, these provisions and costs included 71 million recorded by the subsidiary Renault Spain for voluntary retirements in 2002 or 2003 under the terms of an early retirement plan set up in B. GAINS AND LOSSES ON SALES OF OPERATING SUBSIDIARIES In 2004, these gains and losses include the 39 million impact of settlement of the litigation over interpretation of the contractual terms for the transfer of Renault Véhicules Industriels to Volvo in 2001 (the net-of-tax impact amounts to 20 million). In 2002, this item included a 79 million gain on the sale of Renault's holding in Global Automotive Logistics (note 2.3-C) and a 34 million gain on the sale of shares in Irisbus (note 2.3-B). C. MATERIAL NON-RECURRING ITEMS In 2004, these items include a 49 million provision in view of developments in the commitments concerning end-of-life vehicles in the UK, Italy, Spain and Belgium (note 27.2-B). In 2003, material non-recurring items mainly included: a 62 million adjustment to provisions for additional employee holiday entitlements earned in previous years and to be taken upon retirement, costs and provisions resulting from discontinuation of production of the Avantime ( 50 million), mainly recorded against the advance made by Renault to Matra Automobile to finance investments specific to the vehicle, depreciation of 102 million on industrial assets, including 75 million related to the assets of the Brazilian subsidiary following a fall in activity and the revision of forecasts, principally as a result of developments on the Brazilian market (this depreciation was estimated by discounting future cash flows at a pre-tax rate of 14%), a provision of 15 million related to the new EC directive on end-of-life vehicles (note 27.2-B). 8 - FINANCIAL EXPENSE Interest expenses (518) (316) (328) Interest income Net interest expense (22) (129) (179) Repurchase of redeemable shares (343) - - Other financial income and expenses Financial expense (348) (71) (91) In March and April 2004, Renault made a cash tender offer to buy back its redeemable shares at 450 euros per share, corresponding to a 21% premium over the market price. This offer is reflected in the following items in the 2004 financial statements: a financial expense of 343 million with an after-tax impact of 221 million on the consolidated net income. a 343 million increase in net financial indebtedness (note 25). The interest income registered for 2004 includes 64 million of interest income generated by the termination of one of the transactions designated as a hedge of Nissan's restated shareholders' equity in yen. The transaction concerned a sum of 117 billion yen ( 862 million). Other financial income and expenses mainly include allocations/reversals in respect of the provision for losses on treasury shares held by Renault for the purposes of stock option plans awarded to Group managers and executives. These shares are included in marketable securities, and in 2003 and 2002, 27 million and 37 million respectively were reversed from the provision. No allocation or reversal was applied to this provision during CURRENT AND DEFERRED TAXES Renault SA decided not to renew its option for the French worldwide tax consolidation regime, allowing taxable income to be reported on a consolidated basis, as of January 1, Page 16/ 40